Odds Favor Tough GSE Law

The accounting scandal at Fannie Mae has upped the odds that Congress will pass a strong GSE regulatory reform bill, but there are concerns among some housing groups that the Bush administration might try to push for an even tougher bill.

Last year, the administration wanted a bill that would empower a new regulator to set higher capital requirements, veto new products and, if necessary, place Fannie Mae or Freddie Mac in receivership.

This year, administration officials are being very tight-lipped about their agenda for the government-sponsored enterprises. But sources indicated in early December that administration officials were mulling the idea of cutting the GSEs' lines of credit to Treasury.

Now the buzz is that the administration is considering ways to contain the growth of Fannie and Freddie's mortgage portfolios and their issuance of debt, which has been advocated by Federal Reserve Board chairman Alan Greenspan.

This kind of talk raises concerns about federal support for GSEs and their housing mission, according to Howard Glaser, general counsel for the National Alliance of Independent Mortgage Bankers.

"Mission issues remain very important to a large number of members of Congress and the housing trade groups," Mr. Glaser said.

Last year, Senate Banking Committee chairman Richard Shelby, R-Ala., incorporated the administration's goals in his GSE bill but it did not garner Democratic support and even some Republicans balked.

"The Shelby mark was a pretty strong starting point," said America's Community Bankers president Diane Casey-Landry. And the trade group executive is hoping the administration will stick with its original agenda of getting a strong and credible GSE regulator.

"Our position on GSE reform is to enhance and strengthen the secondary market and to 'do no harm,'" Ms. Casey-Landry said in an interview.

But Mr. Glaser said it is "unclear" if the White House would be satisfied with a Shelby bill this year. Treasury officials would not respond to inquiries about their plans.

National Association of Home Builders executive vice president Jerry Howard is urging all involved in the GSE debate to be cautious.

"The housing finance system has been the backbone of our economy," Mr. Howard said.